Regulation is increasing the bank compliance officer's burden

Financial services firms are being forced to become increasingly risk-focused due to the continuing pressure of regulation, according to a new survey by Thomson Reuters.

In the UK, a greater proportion of compliance staff than any other region spend more than 10 hours per week tracking and analysing changing regulation. The figure has risen from 25% last year to 31% this year. At the same time, one-third of respondents expect their compliance budgets to be the same or less at the end of the year, but 81% expect an increase in the volume of regulatory information. This suggests that budget constraints will continue to bite hard as companies are forced to do more with less.

Global regulations of concern include Dodd-Frank in the US and EMIR in Europe, both of which mandate the central clearing and reporting of OTC derivatives. In the US, FATCA will impose a reporting obligation on all foreign banks that interact with American customers, regardless of where the interaction takes place, or face a 30% withholding tax on income from US financial assets.

In Europe, MiFID II is expected to spell out details of market structure and operation that will affect exchanges, MTFs, dark pools, broker crossing networks, market making, high-frequency trading and algorithmic trading as well as regulatory obligations for buy- and sell-side firms. Meanwhile globally, Basel III covers capital ratios and bank deleveraging; there are also significant national rules, such as the financial transaction tax in France, and ring-fencing of high-street and investment banking in the UK.

“Compliance officers are finding the environments in which they operate increasingly challenging,” said Mark Schlageter, head of governance, risk and compliance at Thomson Reuters. “Shifting supervisory expectations, the volume and pace of regulatory change and the start of big implementation programmes for major complex legislation continue to pile diverse pressures on compliance functions. It is therefore essential that the effective management of risk and compliance has key contribution not only from a firm’s compliance function but also from its board and supervisory authorities.”

Some 40% of compliance staff find themselves spending at least half a working day or more redrafting policies and procedures to reflect developing regulatory requirements, according to the Thomson Reuters survey. The firm’s report argues that company boards and senior managers must become increasingly responsible for risk and compliance.

Reflecting the increasing predominance of the topic, 17% of respondents expect a significant increase in their budget for compliance this year, up from 11% last year. Some 67% expect their budget to rise overall.

The survey was based on 800 compliance practitioners from financial services firms including banks, brokers, insurers and asset managers in 62 countries across the whole world, interviewed between November and January.

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